tenancy rights remain the same - as they continue to pay rent they 'roll over' from the initial period covered by the paperwork. your friends have three options:
1. pay the money and hope she doesn't turf them out anyway (and...will she sell the house; make a good landlord etc?)
2. continue discussion, argue said case and produce evidence of alternative costs due to heating bills (which she would probably want to settle the point)
3. tell her to get stuffed, remind her that turfing out a tenant can be costly and stressful, and decide not to pay their rent from now on at all (and ensure she evicts them lawfully - and take an age!)
only your friends will know the correct course of action, but i think they should worry less. the landlord is the one who stands to lose the most (financially) and being reminded of that may help her with her decision-making progress. at the end of the day, it's £500 - if they love the house, are settled and reckon the landlord will be ok...maybe it's worth just stumping up? good luck to your friends x